NZ's first PPP prison to be built at Wiri

The Government intends to commission a new prison at Wiri that will be designed, built and operated under a public-private partnership, Infrastructure Minister Bill English and Corrections Minister Judith Collins announced today.

 

The approximately 1000-bed male prison on land owned by the Department of Corrections at Wiri in South Auckland is subject to consents and the successful completion of an open tender process. It will be the first PPP undertaken by this Government.

 

Mr English said the Government was open to greater use of private sector expertise if it delivered enhanced services and better value for taxpayers.

 

"Appropriate use of public-private partnerships can introduce new design, financing, maintenance and operating techniques that provide better services and value to taxpayers," Mr English said.

 

"International experience suggests that building a new prison at Wiri using a public-private partnership will offer savings of between 10 and 20 percent over conventional methods over the 25 to 35-year life of the proposed contract.

 

"Those are substantial gains that will leave more money available for other vital infrastructure priorities like schools, hospitals and roads.

 

"Raising productivity in the public sector - including through better procurement and management of major assets - is an important part of our economic plan.

 

"This Government has provided a big infrastructure funding boost, but we are committed to spending that money wisely in all areas, including Corrections.

 

Ms Collins said an additional 2270 prison beds were needed by 2019 to cope with forecast growth in prisoner numbers and the need to replace ageing existing prisons.

 

"In order to have a world-class corrections system, we need exposure to world-class innovation and expertise," Ms Collins said.

 

"A custodial PPP is an opportunity to inject new ideas and new innovations into the corrections sector to enhance public safety, improve rehabilitation and lower costs.

 

"Currently it costs an average of $91,000 to keep a prisoner for a year. I think that we owe it to taxpayers to actively find ways of reducing those costs while improving standards and security across the board."

 

The proposed prison will operate within the current Corrections framework. All prisoners will remain the responsibility of the Chief Executive of the Department of Corrections.

 

The prison will have to comply with all relevant New Zealand legislation and international obligations.

 

Prisoners will still have the right to complain to the Office of the Ombudsmen. The Office of the Auditor-General can at any time, investigate the way Corrections is managing its prison management contract.

 

The Government is committed to a strong focus on rehabilitation and reintegration of Maori offenders.

 

"I would expect that the successful private provider will include Maori representation and/or Maori-specific services such as rehabilitative programmes," Ms Collins said.

 

A range of PPP models were explored by the Government. A custodial PPP, in which the private sector designs, builds, finances, maintains and operates the new prison, was found to deliver the best relative value for money.

 

Public consultation will begin shortly on resource consents. The tender process will begin before the end of the year and the prison is expected to be operational by the end of 2014.

 

 

 

PPP prison questions and answers

 

 

What decision is being announced today?

 

We are signalling the Government's clear preference for a public private partnership for design, construction and operational management of a new prison. The final decision will be made in about six months. 

 

Why pursue a PPP arrangement?

 

It provides the opportunity for cost savings and to enhance our overall service delivery in the prison system. It can do this by bringing together both private and public sector expertise to get the best outcomes possible for the public and for offenders in a way which would not otherwise be possible.

 

International experience suggests a custodial PPP has the potential to offer savings of between 10 and 20 percent over conventional procurement methods over the 25 to 35-year life of the proposed contract as well as delivering more innovative prison services.

 

How will savings be achieved - will this be through reducing the number of staff, or what they are paid?

 

There are potential savings on all aspects of the project; design, build and operation. It is important is that the contract with the new provider will clearly set out the outcomes required. The private provider will suffer financial penalties if the conditions of the contract are not met. This is a strong incentive for ensuring adequate staffing levels of kept.

 

What is New Zealand's past experience with private prisons?

 

Under the previous National Government Auckland Central Remand Prison (ACRP) was successfully managed by the private sector until the arrangement was stopped by Labour on ideological grounds. Having the private sector also design and construct the prison is a logical extension of that arrangement.

 

In 2004, filled to maximum capacity with 360 inmates, ACRP had one suicide and only three serious assaults - a low level of serious incidents for an institution of this type. Only 5.5 per cent of inmates returned positive drug tests, compared with over 20 per cent in the public sector.

 

Many of the innovations introduced by the private manager at ACRP were adopted by Corrections and continue to be used at prisons throughout the country.

 

How long will the contract be for?

 

Typically such contracts are for 25-35 years to make them financially viable for a private sector consortium. If the consortium does not deliver against the requirements of the contract, then it will incur financial penalties. This is a significant incentive to perform.

 

What will it cost?

 

The capital and annual operating cost will not be known until after the open tender process and negotiations with the successful consortium.

 

How will the Government ensure prisoners are well treated?

 

The Chief Executive of the Department of Corrections remains accountable for everything that happens in privately operated prisons - placing privately managed prisons clearly within the ambit and under the oversight of the State. These prisons will operate within the corrections system, not in parallel to it, and the accountability mechanisms set up within the Corrections (Contract Management of Prisons) Act 2009 clearly recognise and facilitate this.

 

Under the Act, prisoners remain in the legal custody of the Chief Executive of Corrections at all times. This will not change when the prisoner is held in a prison operated under contract by a private sector consortium.                                     

 

The Chief Executive remains ultimately accountable for the acts or omissions of the consortium. This will drive a rigorous performance management regime. 

 

Measures will be put in place to make sure standards are being maintained and are actively monitored:

 

• The consortium must comply with all our laws.
• There will be prison monitors in each prison to act as Corrections' Chief Executive's "eyes and ears" and ensure the consortium is complying with the law and the contract.
• Special monitors can investigate any specific issues or concerns, including the suspicion of corruption or criminal activity in a prison.
• Ombudsmen will continue to investigate complaints made by prisoners and would be notified of any serious incidents in a prison and actively monitor the investigation of these incidents.
• Prison inspectors will continue to ensure the safe, fair and humane treatment of offenders. They would continue to interview prisoners, and resolve complaints as they do now. They would continue to investigate every death in custody, and may investigate other serious incidents.
• The consortium will need to report regularly and in depth to the Chief Executive of Corrections so any issues and trends can be identified early and resolved. Serious incidents (ie escape attempts and prisoner deaths) must also be reported immediately to the Chief Executive. 

 

Will this be an American type prison?

 

No. This will be a New Zealand style prison. The prison will be designed, built and run in accordance with New Zealand's legal requirements.

 

How will the Government ensure the prison is fit for purpose in terms of how it is operated?

 

Here in New Zealand the legislation sets the standard: a private sector consortium will need to perform as well if not better than existing prisons. There will be measures in place to make sure standards are being maintained and are actively monitored. Work is underway to determine the exact outcomes expected from the consortium and these will be built into the contract.

 

How will the project be funded?

 

The final cost and timing of payments for the prison will depend on the commercial negotiations with prospective providers.

 

Is the Government considering other PPPs?

 

Yes, the Government has already signalled its intention to consider PPP arrangements for other areas of the State Sector, for example, in education.

 

How big is the prison?

 

Present thinking is that the new prison will provide approximately 1000 beds. 

 

When will the prison be complete?

 

It is anticipated the prison will be operational by the end of 2014.

 

What will be the role of Maori?

 

It is expected that the private provider will include Maori representation and/or Maori will be involved in providing Maori specific services.

 

How will the Government ensure there is a focus on rehabilitation?

 

The exact rehabilitative and reintegrative outcomes expected from the consortium will be built into the contract. The consortium will need to perform as well if not better than existing prisons. Active monitoring will ensure standards are being maintained.

 

When will work start on the prison?

 

It is anticipated construction work will start in the second half of 2012 following completion of an open tender process and that the prison will become operational by the end of 2014.

 

Will there be an open tender process?

 

Yes. An Expression of Interest (EOI) will be issued in the fourth quarter of this year, followed by a request for Proposal (RFP) before the middle of 2011.

 

Will the tender be open to New Zealand companies?

 

Yes. In particular there are likely to be opportunities for local companies and organisations to be involved in construction and some services such as rehabilitation programmes. It is likely, for example, the private provider will include Maori representation and/or Maori specific services.

 

Why are you building a new prison?

 

An additional 2270 prison beds will be needed by 2019 for forecast growth in prisoner numbers and the need to replace ageing prisons.

 

Will the public and staff have the chance to express their views?

 

Public consultation on private sector management of prisons took place when the legislation enabling contract management of prisons was passed in Parliament in 2009. Those with an interest had the opportunity to make submissions to the Law and Order Select Committee when it was considering the draft legislation.

 

Who is doing the work?

 

An interdepartmental steering group led by Corrections, and including representatives from Treasury, SSC, DPMC, a Maori adviser, a commercial adviser and an international PPP expert will oversee the work which is carried out by a specialist project team.

 

Where to from here?

 

Corrections is currently establishing its steering group and project team, which will prepare for the tender process and related documentation. Over the next week an RFP will be issued seeking commercial/financial advisers to support the project. It is expected that an EOI will be issued in the fourth quarter of this year, followed by an RFP before the middle of 2011.